binve (< 20)

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We continue to hear so much complaining: "Greek is a small economy, Hungary debt issue was already known, Portugal while bigger than Greece is still small globally,... ". In essence, there is a lot of rationalization and downplay of the emerging sovereign debt crisis. Well, when Japan speaks we should all listen. While it is old news that Japan has a high public debt, talk of defaulting on that debt in any form is fairly new. I think it would be very difficult to sweep this under the rug. This is a big global deal, debt issues are not isolated to small marginal economies.

Japan's new prime minister, Naoto Kan, today warned that the country risked being sucked into a Greek-style debt crisis unless it quickly reined in its massive public debt.

Kan, who took over last week after the sudden resignation of Yukio Hatoyama, told MPs that Japan risked defaulting if it continued to issue bonds at the current pace.

"Our country's outstanding public debt is huge," he said in his first policy speech to parliament. "Our public finances have become the worst of any developed country.

"We cannot sustain public finance that overly relies on issuing bonds. As we can see from the eurozone confusion that started in Greece, there is a risk of default if growing public debt is neglected and trust lost in the bond market."

Japan's public debt stood at 218% of gross domestic product last year, according to the International Monetary Fund – the highest in the industrialised world.

Kan said the debt problem could not be dealt with overnight. "That is why we need to have a drastic reform from now in order to obtain fiscal health."

His prospects for honouring a commitment to devise a tighter fiscal plan by the end of the month improved today after Shizuka Kamei resigned as financial services minister over a disagreement with cabinet colleagues on post office privatization.

Kamei, who leads a junior coalition partner, had advocated big spending to drag the world's second-largest economy into sustained recovery and fend off long-term deflation. [My comment: Again, more "borrow and spend" planning to get out of a crisis that was formed by to much borrowing and spending. When you have Debt Satuation, this delay tactic no longer works]